Presenting the NBH's fresh quarterly Inflation Report, Balatoni said inflation was 3.7pc in November, a marked decrease compared to previous years. Core inflation, however, was 4.4pc, indicating that this is not yet a sign of price stability, which is expected to be achieved only in 2026.

Balatoni said the inflation rate was largely in line with the NBH’s September forecast, but there were some surprises in terms of its structure.

Core inflation was lower than the September forecast, but the increase in the prices of unprocessed food and fuel was higher than expected.

According to the central bank's forecast, inflation is expected to be 4.3pc in December and 4.6pc in January, which will start to decrease in the second quarter of next year, and from March it will be within the 3pc +/- 1pc tolerance band for the majority of the year.

Based on the medium-term forecast, the NBH raised its inflation forecast for 2025 by 0.5-0.6 percentage point due to supply effects and the weakening of the forint exchange rate, so it is expected to be in the range of 3.3-4.1pc next year.

Inflation in 2026 could fall to 2.5-3.5pc and remain in the same range in 2027, the report shows.

Core inflation will be between 4.6-4.7pc this year before falling to 3.2-3.8pc in 2025 and 2.6-3.2pc in the two years after.

Balatoni said the Hungarian economy will start to grow from the second half of next year. Further real wage increases are expected, and the purchasing power of labour income will therefore increase, by around 4pc overall.

He noted that Hungarian consumption data is consistent with regional data, Hungarian consumption is between that of Romania and Poland.

He said consumption with the favourable labour market situation and rising real wages is currently the most important factor in economic growth.

Balatoni said there is a sharp increase in household borrowing, and the growth in the loan portfolio may peak at around 15pc next year. The household savings rate is expected to stabilize at around 10-11pc.

According to the central bank's report, corporate investments have so far lagged behind expectations, with the largest decline, exceeding 20pc, in the manufacturing sector, which represents the largest share. The reason for the decline in investments is cyclically weak demand and subdued corporate capacity utilization. In 2025, the investment cycle is expected to turn positive as deferred investment projects are implemented.

Large investment projects by BMW, BYD and CATL are expected to start production in 2025.

Factories will accelerate GDP growth by gradually increasing capacity over several years. The growth impact in 2025 will be around 0.6 percentage points, taking into account suppliers in the production chain. By 2028-29, they will account for 2pc of the total Hungarian GDP.

GDP growth is expected to be around 0.3-0.7pc this year and then grow to 2.6-3.6pc next year.

In 2026 growth will be around 3.5-4.5pc followed by 2.5-3.5pc in 2027, according to the NBH’s estimates.

Meanwhile, All Hungarian large banks join InvestEU guarantee programme

All ten Hungarian large banks are now part of the Garantiqa InvestEU guarantee programme, launched in early October, Garantiqa Hitelgarancia said.

The programme is expected to help 17,000 Hungarian SMEs receive bank credit that could not access it earlier.

European Union credit guarantees in the framework of the programme will mobilise close to HUF 600bn of SME credit, it was reported earlier.

In the framework of the programme, Garantiqa can undertake guarantees to the amount of EUR 1bn with 95pc counter-guarantee from the European Union in the period 2021-2027.

The guarantees will back credit for investments in the digital and green transitions, regional and rural development, the farm and food industry, supply chain developments, efficiency improvements and R+D.


Demand jumps for reduced-rate Szechenyi Card investment credit

Demand has picked up among SMEs for the Szechenyi Card investment loans since interest rates on the facilities were reduced to 3.5pc from 5pc from November, the National Economy Ministry said.

State secretary Richard Szabados noted that the reduction was included in a package of measures recently approved by the government to boost economic growth.

The latest statistics show applications for the loans jumped 90pc to 1,714 from October 2024. The loan amount requested rose 81pc to HUF 49.3bn.
 

Source: 
MTI - The Hungarian News Agency, founded in 1881.

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